Economy

USA manufacturing shrinks for first time in three years

USA manufacturing shrinks for first time in three years”

Anemic demand for United States goods, with persistent drops in export orders, produced a "notable decrease" in business confidence, as indicators for production, employment and order backlogs all fell, according to the Institute for Supply Management.

WASHINGTON (AP) - The U.S. The 30-year interest swap rate fell to a record low of 1.4762% on Tuesday after closing at 1.54% on Friday.

Though President Donald Trump has championed the US manufacturing sector, it is now the weakest part of the American economy, suffering repeat shocks from the US-China trade war, which has raised prices and eaten into demand, and from a weakening global economy.

Shortly after the opening bell, the Dow Jones Industrial Average erased 250.35 points, or 0.95 percent, to 26,152.93. A separate measure of new orders fell by 3.6 percentage points, a sign that output may continue to decline.

A new round of us tariffs on imports of Chinese goods, mostly consumer products like clothing, footwear and televisions, took effect on September 1. Factories also cut jobs for the first time since September 2016.

Manufacturing makes up about 11 per cent of the USA economy, so in and of itself a slowdown at companies that build things is likely not enough alone to tip the economy into recession.

"This is a grim report", said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

A sharp drop in oil prices in 2015 and lower prices for many agricultural products caused oil drillers and farmers to cut back the following year on their investment in tractors, machinery and drilling rigs. The new orders index fell to 47.2, down from 50.8 in July and the first time the gauge has dropped below 50 since December 2015.

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That, in turn, lowered output all along the manufacturing supply chain, from steelmakers to heavy equipment companies such as Caterpillar. Construction spending fell 2.7% on a year-on-year basis in July.

ISM Manufacturing PMI drops to lowest level in three years in August.

President Trump's fight with China, and his tariffs on steel and aluminum imports, are meant to help USA manufacturers but are now having the opposite effect.

ISM Manufacturing Business Survey Committee Chair Tim Fiore said in an interview that with new orders posting the lowest reading of the key PMI sub index, at 47.2, after a few months in the low 50s range, coupled with new export orders down 4.8% to 43.3, there is a direct correlation there.

"Tariffs are still weighing heavily on supply managers' minds as they adjust their supply or manufacturing sources", Fiore said.

On Sunday, the USA started charging a 15% tariff on about $112 billion of Chinese products. "Some industries can do it quickly while others need more time". Manufacturing activity is declining in 17 out of 30 countries surveyed by the consulting firm IHS Markit.

An index measuring manufacturing production declined by 1.3 points, according to the ISM. Similar surveys in Europe and Asia showed earlier that factory activity had hit the skids. Factory activity is contracting in the U.K., Germany, Japan and South Korea, according to IHS Markit's manufacturers' purchasing managers' indexes. The media have been using "recession" along with any sort of slowing of late, although this report does represent a month of contraction.



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